No gift tax incurred for contributions up to $15,000 ($30,000 per couple) for each beneficiary in a single year.
For a child under the age of 19 considered a dependent at the end of year (or a full-time college student under the age of 24), the first $2,200 of child's unearned income is tax-free. (Amounts over the $2,200 threshold will be taxed at the rates for trusts and estates. See IRS Publication 929 for more detail.)
IMPORTANT DETAILS
All assets are held in the child's name.
20% of the assets will be considered when applying for financial aid.
A custodial account is an irrevocable gift and must be turned over to the child when he or she reaches the age of majority, typically 18 or 21 (or up to 25), depending on the governing state.
Any funds used prior to the age of majority must be used for the sole benefit of the minor.
